Liberalisation of the British household electricity market, in which previously
monopolised regional markets were exposed to large-scale entry, is used as a
natural experiment on oligopolistic nonlinear pricing. Each oligopolist offered a
single two-part electricity tariff, but inconsistent with current theory, the two-part
tariffs were heterogeneous in ways that cannot be attributed to explanations such
as asymmetric costs or variations in brand loyalty. Instead, the evidence suggests
that firms deliberately differentiated tbeir tariff structures, resulting in market
segmentation according to consumers' usage.

Description:

This paper was accepted for publication in the journal Energy Journal and the definitive published version is available at http://dx.doi.org/10.5547/01956574.35.1.4. This paper is also a CCP Working Paper 12-2 and can be found at: http://competitionpolicy.ac.uk/publications/working-papers-2012

Sponsor:

The financial support of the Economic and Social Research Council (ESRC) is gratefully
acknowledged.